Wow! In a strange turn of events, Chris Anderson got it all wrong, while Malcolm Gladwell got it right. What’s that? Free. Chris Anderson thinks it is the future of price; that companies should give their products away free and find other, magical ways to generate revenue. Gladwell roundly criticizes this idea; it’s worth reading his review because his critique is effective on several levels.

Moving on…I want to make some crazy predictions here. Free is dead. It’s a Ponzi scheme, and we’re all invested in it. We all love free, but it has a price. We all think advertising will pay for everything, but in the end, something has to pay for advertising, and that something is in a recession.

Subscription was the model for media for a long time. In the last century, advertising subsidized subscription, and in some markets, subsumed it. In the 21st century, we’re going to have to start paying for things again.

Would you be willing to pay for sites such as the New York Times (as many people, myself include, do for the top-tier reporting of the Journal)? Would the tradeoff be worthwhile if there were less advertisements? What if, assuming that websites are wealth maximizing, these sites charge subscription fees, continue to advertise, and continue to sell users’ information? Would you be willing to demand more from publications if you actually paid for them?

The next crazy prediction: free is going to create a backlash similar to the anti-Wal-Mart movement.

Comments

It is going to get built into your Internet bill. An extra$10 a month and you will automatically get access to a set of pre-chosen internet sites. Cable redux. On the other hand as things like Opera’s individual web servers come out, there will be even more splintering.

I don’t think enough people will pay for access for websites, because there is too much competition from free sites. People are either used to excessive advertising, or they find a way to block it. Any information on pay sites will be on Wikipedia eventually anyway. It would be nearly impossible to legally protect information with copyright laws, simply because the internet is too big. I’ve only paid to access very few websites, and then only for games that are far superior to the free stuff that’s available. It would be very hard to convince me to pay for access to other sites.

So the newspapers’ complaint about “free” is that hyperlinks from news aggregators sever viewing of the articles from viewing of the newspapers’ advertisements. There are plenty of ways to keep that from happening: only supply links to short summaries of the articles, the rest of the article is only accessible while viewing the actual news site. Or when a viewer requests the article, combine the article and some associated advertisements into a single (copyrighted) image file, and then serve that image file as opposed to serving separate news and advertising files, etc.
Granted, those methods cut down on the flexibility of the websites, but there’s still a lot of room for maintaining the broadcast TV version of free (advertising attached to content) for cheap IP.

Outside of cheap IP, I do think Anderson is wrong. The methods above would really only work for things like newspapers, where content is cheap and quickly loses its value (If a paper costs a dollar, how much is each article worth? How much is each article worth a week later? ). If the IP is valuable to a lot of people for a long period of time, then it is worth it to someone go through some effort to strip the advertising and distribute the IP without it.

I do think, though, there is a perception among people who are used to open source software that this should work. But a huge portion of the open source software I’m familiar with came out of grants or foundations or other sources of support. The big stuff, anyway. The useful stuff. It needs support.

“Free” isn’t a decision. “Free” is an inevitability borne of new distribution methods.

Electronic distribution eliminates costly storage and distribution costs and replaces them with inexpensive little 1’s and 0’s. So inexpensive, that large corporations aren’t needed for their re-distribution.

If one accepts that computers are very good at making exact copies of 1’s and 0’s (trust me, they are); “free” becomes a means of finding a way to survive a harsh new economic reality. Finding new ways to convince people to give you money in the face of negligible distribution costs is not a hippie free-for-all, it’s just good business.

But electronic distribution is not “free.” Gladwell discusses this as a kind of technologist’s optimism, using the example of nuclear energy. Even if energy were “free,” transmission, storage, etc is not.

For me, this brings to mind “professional” webcomics. Webcomic artists have tried multiple models (such as micropayments and subscriptions) to monetize their art, but the ONLY model that has proven to be profitable is to give away the content for free and generate revenue via advertising and merchandise. This is much to the chagrin of several print comic artists eager to jump ship from sinking newspapers but uninterested in selling T-shirts and giving comics away for free, but them’s the breaks.

@ Chris H.
“Finding new ways to convince people to give you money in the face of negligible distribution costs is not a hippie free-for-all, it’s just good business.”
Gladwell’s point is that
– most businesses have non-negligible distribution costs, along with non-negligible development and production costs.
– those businesses that do have negligible distribution costs and try the “free” route generally don’t earn enough to cover their development and production costs (youtube).

Amusing post, but you clearly haven’t read the book. Not only do I not say advertising will pay for everything, I explicitly say it won’t. That was the naive first wave of web business models, now eclipsed by Freemium (minority pay, subsidizing majority free)

It is, however, amusing to see your speculation about an anti-free backlash. Has there ever been a consumer revolt again free in history? Or demonstrations to liberate machines from low-paid servitude? Please tell us more about how this revolt is going to start (outside of newspaper unions and IP lawyers).

I agree that electronic distribution isn’t “free,” but compared to the old ways of distribution it might as well be.

How many pallets of CDs does Apple keep on hand to replenish iTunes when it gets low? How many envelopes full of DVDs does NetFlix keep around for their streaming service? How many warehouses full of ebooks does Amazon own? None, none, and none.

You don’t need warehouses to store your product. You don’t need specialized machinery to duplicate it. These are good things for business. Apple, NetFlix, and Amazon are all successful businesses benefiting from new distribution methods that reduce their costs.

But comparing this to the 50’s promise of free nuclear energy is a bit specious. When everybody thought they’d have their own reactors in their homes and cars, the vision of “free” energy everywhere was a reasonable expectation. When that didn’t turn out to be the case, it became a funny little footnote of the atomic age folks trot out to tell existing businesses they don’t have to change.

We don’t all own nuclear reactors, but if you’re reading this you own a computer with an internet connection. This means you’re sitting in front of a machine that is great at receiving, copying, and sending 1’s and 0’s. For those 1’s and 0’s? “Free” is inevitable.

This topic is suddenly quite hot – to the idea expressed at the top of the thread that content providers will add on some cable-like content fee: at least someone is bringing the ISPs into the equation. These folks are making out large, while content providers, who are actually thinking and creating, as opposed to collecting fees for pipes laid in the ground years ago, are making bupkis. I posted something on this the other day, here:

I’ll be first to admit it’s a less than perfect revision of how things are, but I see a lot of reasons for things moving in such a direction, as opposed to a continuation of a schizoid approach with monopoly tube-meisters on one hand, and total non-rewarding of content-beggars on the other.

This means you’re sitting in front of a machine that is great at receiving, copying, and sending 1’s and 0’s. For those 1’s and 0’s? “Free” is inevitable.

But this is not the issue. The cost of information is not so much the cost of the media, but the cost of the LABOUR. Ideas may be cheap, but anyone who dismisses the amount of work required to make an idea a tangible piece of software, or a movie, or musical performance, a novel, or an investigative report is dismissing the human cost of creative work. Until labour is completely free, then no creative work will ever be truly free either.

Unfortunately, people don’t value the work required to produce the content. Even back in tohe 80’s and 90’s, I remember people whining that Nintendo games shouldn’t be so expensive, because the cost of the cartridge was only a couple bucks of materials. We put the value on the media the content is delivered on, or the distribution network required to move that media. But without the skilled labour of the author, that media is worthless.

Now, I agree that current Copyright law has been extended to benefit the intermediate corporations more than the original artists, and that the balance between the rights of an artist to profit from their labor and control their ideas needs to be balanced with the needs of society as a whole. I’m a huge fan of the creative commons license as an extention available within the legal framework of copyright law. But to me, many of those arguments are issues of fine tuning, rather than wholesale revolution. In this new digital era, the focus must be restored to the labor of the artists, not the value of the physical media.

@Chris Anderson, so happy that you showed up. I’ll read Free but it will take me a few months to catch up (I’m still on Nudge). And I’ll actually buy a copy, because I think you should be paid for your hard work!

On a consumer backlash, it is similar to the Wal-Mart phenomenon. Many consumers have made a backlash against “cheap,” because it carries costs with it (plastic, leaded shit from China, homogenization, etc). I think “free” has similar costs, and have several examples to convey the problem.

Chris just give me a weeks notice before you and PZ and the rest of the blogladites i read everyday start charging for me to fill my days at work…I may have to edit my favorites list (right now you guys are the fifth on the list, which may be on the bubble)

Newspapers in particular are not suffering from a lack of revenue, or even a lack of profit. They’re suffering from management that has expected them to continue being a high-margin business (profits at 30% or more) when that is no longer the case. Players in the industry I work in consider themselves lucky to get a tenth of that in profits, and yet, last I checked, that industry still contains a bunch of multi-billion dollar businesses at the top, and pretty much everyone is still making money hand over fist; they’re just not making as much money as newspapers do. Maybe some of these panicked media companies will have to get used to the idea that owning a media company isn’t a license to print unlimited amounts of money. Lots of low-margin industries thrive; other than the problems with management, I don’t see why newspapers can’t make do with with simply turning less of a profit…a profitable business is still a profitable business, after all.

Maybe it’s just me, but I think the kind of intrusive, can’t get away from it advertising that is associated with the web, and especially with the model discussed here for non-free content, makes me determined to not buy any of the products or services advertised. If I do need something that is advertised in an intrusive way, I go out of my way to support the rivals of those companies that have so annoyed me.

The internet is 99.999 recurring percent crap. We could do with all those seeking to make money from it simply getting out of the market.

actually, it’s quite possible that there will be a “free-backlash”, but only in the sense that internet business de-personalizes everything. people will want to have human services again, and will be willing to pay for it, too.